Advanced Digital is sold

Quantum Corp. acquires Redmond data storage firm

By KRISTEN MILLARES BOLT, P-I REPORTER

Updated 10:00 pm, Tuesday, May 2, 2006

Advanced Digital Information Corp., the Redmond-based provider of digital data storage products and software, will be bought by San Jose, Calif.-based storage company Quantum Corp. for about $770 million.

The deal, announced by Quantum after the market closed Tuesday, brings together two companies with more than $1.2 billion in combined revenue over the past year, though at opposite sides of the data storage market.

"They build low-touch, high-volume products that are less expensive and sold through large distributors," said Peter van Oppen, chairman and chief executive of Advanced Digital. "We sell high-touch, low-volume products that tend to be more solution-based, through high-level resellers and with considerable field support."

Van Oppen said the deal was unsolicited and occurred in the past few weeks; he does not yet know if he will go with the new company, but will remain at Advanced Digital for the next three to four months to help manage the business and retain the employees that Quantum says it needs.

"We are strong at the low end of the market -- in the small- to medium-size business space, with some of the volume products like removable hard disks," said Rick Belluzzo, Quantum's chairman and chief executive. "They tend to be stronger as a systems company" -- systems that require customer support and a highly trained sales team.

Advanced Digital employs between 1,100 and 1,200 people worldwide, with roughly 250 employees at its Redmond headquarters.

In an interview Tuesday, Belluzzo -- formerly Microsoft Corp.'s president and chief operating officer -- said Advanced Digital's sales force is part of the reason that Quantum is acquiring the company. He called those employees necessary to maintain the company's technical support for its more upscale products.

"We don't see massive consolidation -- we tend to like to have effective teams operating where they are," Belluzzo said, speaking from Quantum's San Jose headquarters, where 45 to 50 of Quantum's roughly 2,400 employees are based. "There will certainly be some realignment -- where you have some overlap -- but our intent on sales force is to maintain the current level of combined staffing."

But, he said of ADIC's employees, "we have no intention of picking them up and moving them to San Jose."

Belluzzo said the deal, besides generating more cash flow and profits, will give Quantum better access to more customers, as well as the ability to grow outside of its traditional tape products.

He conceded that there would be "synergies" that will save the combined company $45 million per year and that could lead to layoffs; van Oppen noted that "there can be no presumption about anything."

Of the managers and others in Advance Digital's headquarters, Belluzzo said, "ADIC had done a wonderful job of creating a higher end, enterprise level customer base -- the people in Redmond really know how to do that, and we tend to treasure that."

Advanced Digital was founded in 1983 to market a mini-computer data cartridge backup drive; in 1994, it was bought by the Redmond-based Interpoint, only to become an independent, publicly traded company two years later. Just this year, it announced its $63 million purchase of Rocksoft Ltd., an Australian data deduplication technology company. Quantum said it will continue that deal.

Advanced Digital shareholders will receive $12.25 per share in cash from the deal, which is expected to close in about a month; if they prefer to buy Quantum stock instead of receiving cash, they can get 3.461 shares of Quantum stock for each Advanced Digital share they own. Quantum said it would issue no more than roughly 10 percent of the entire merger consideration in stock.

Tuesday, Quantum's stock rose 4 percent to close at $3.48 per share on the New York Stock Exchange before the deal was announced. Advanced Digital's stock dropped by 0.12 percent to close at $8.27 on the Nasdaq National Market.